Do business assets count as community property during divorce?

Filing for divorce in California may involve a complex division of assets, especially if you are an entrepreneur or business owner. California is a community property state, which means that the state considers all the assets you and your spouse acquired during your marriage to belong to both of you. According to state law, you and your spouse each own half of anything that falls under the community property category. There are several factors that may determine whether your business counts as community property.

The California Judicial Branch lists “property” as anything that has value, including a business. Other common types of property include houses, bank accounts, cars and retirement savings. In general, this may mean that the assets and debts of your business are community property belonging equally to you and your spouse.

However, there are some situations that may make a court consider your business to be separate property. Usually, separate property does not get divided during a divorce; you keep full ownership of it. Your business may be your own separate property if you started it before you got married. If you owned your business before you got married and never changed to paperwork to make your spouse a partner, the court may consider your company to belong only to you. In this case, you may not have to split your business assets with your spouse during a divorce.

Asset division may become more complicated if a court considers your business a commingling of both community and separate property. This may happen if you started the business before you got married but later added your spouse as an employee or partner. The court may then consider a portion of the business to belong to both you and your spouse.